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EDITORIAL - Fixing tax collection

Published:Tuesday | May 20, 2014 | 12:00 AM

An International Monetary Fund (IMF) official recently offered the Jamaican Government a useful perspective from which to approach its lagging tax-collection initiative.

Think of it, he suggested, as part of the administration's social-policy agenda. The more money the Government collects in taxes, not only will it find it easier to meet its fiscal obligations under its programme with the Fund, will also spend on social services and public infrastructure such as roads, schools, hospitals and clinics.

As a bit of an arithmetic equation, it is hardly likely that this equation is lost on the Simpson Miller administration, or, for that matter, any of its predecessors. It is just that Jamaican governments have been unable to internalise the concept and, thereby, execute it with energy and rigour.

The upshot is that while Jamaicans claim that the country is overtaxed - tax collection hovers at around 26 per cent of gross domestic product (GDP) - vast numbers of people who earn a lot pay little or nothing.

TAX EVASION

For instance, four years ago, Bruce Golding, then the island's prime minister, lamented the fact that, outside of pay-as-you-earn (PAYE), a mere 4,000 persons or so were on the tax rolls. He estimated that it should have been a quarter-million. Two years later, a private-sector analysis showed that of the 62,000 registered firms, only 10 per cent filed income-tax returns, and only 10 per cent actually paid taxes. Or, as Mr Golding starkly pointed out, one per cent of the firms accounted for 75 per cent of corporate taxes, of which he estimated 80 per cent was not paid. The delinquency rate for property taxes was estimated at 50 per cent.

One upshot of this state of affairs was last month's struggle by Peter Phillips, the finance minister, to close a J$2.25-billion gap in his Budget for this fiscal year.

CHANGING TAXATION CULTURE

Things may have improved since Mr Golding's time - although the authorities have not been particularly open with their data. The Government, however, should it grasp the moment, is in a far better circumstance than before to change the culture towards taxation.

We sense a deepening appreciation of reforms being insisted on by the IMF, including the overhaul of its tax arrangements, which offer Jamaica its best chance of recovery from its economic crisis. Two things are important in this respect. One is last year's law to create Tax Administration Jamaica as a semi-autonomous tax-collection agency, with relatively wide powers to its leadership. The second is that subject to a potential final appeal, the legal restraint on appointing a leader to this agency is nearing its end.

The last point is important, for while the policy stance of the finance minister is important, the day-to-day culture of the agency will be shaped, to a large degree, by who heads it.

It is important, therefore, that the appointee be not only technically competent, but has the personality and stature that adds to the profile and authority of the agency and the will to go after tax evaders. That person should be deemed of equivalent status to, say, the governor of the central bank and be compensated likewise.

In that regard, we disagree that the commissioner general can only be a citizen of Jamaica, instead of allowing for recruitment of the best person for the job - of whatever citizenship.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.